It is not surprising that a party of career politicians such as Congress sees power as an end in itself. Even if the route to that power is paved through irresponsible populism. In the past, it has often hedged on profligacy to cement hold on power and paid for it in the end but that doesn’t seem to have dented its belief on doles and entitlements as transient tools to win votes. Congress’ irresponsible policies have imposed terrible long-term costs on the economy but, as former prime minister Manmohan Singh had once said in Parliament quoting John Maynard Keynes: “in the long-term we are all dead”.

Much has been written about the scam regime that UPA 2 oversaw which is believed to be a major factor behind its ouster in 2014. A lot less attention has been paid to how Congress paralysed the banking sector through fiscal profligacy. The Union Budget presented by P Chidambaram in 2008 announced a whopping Rs 60,000 crore outlay by way of debt relief for farmers that eventually affected the banks’ finances.

The thing about farm loan waiver is that it is bad economics and worse politics. It has a limited, transitory impact on small and marginal farmers and those involved in tenant farming — a segment that has been hit hardest by the agrarian crisis and relies on credit from informal sources. It also encourages credit indiscipline among those who are in a position to repay and penalises honest practices. The waivers also create a perverse paradigm where the big and mid-size farmers benefit, and small and marginal farmers are pushed towards the informal sector. In other words, it has the opposite effect of the intended outcome.

As a report in livemint points quoting various studies, “…small farmers use money saved from loan waiver for consumption activities and not to augment investment to increase agricultural productivity. This results in lower agricultural produce for small farmers during next loan cycles. On the contrary, the big and mid-size farmers (with more than 2 ha of landholding size) actually gain from farm loan waivers.”

Farm loan waivers are essentially bribes paid by the state to atone for the sins of not implementing structural reforms in India’s biggest private sector that employs the highest number of people—agriculture—where wages have stalled and farming has become unproductive. We must remember here that while Congress touts higher wage growth in the rural sector during the UPA years, it forgets to mention the impact of double-digit inflation that effectively made such a “wage growth” meaningless.

There is no denying the nature and seriousness of the agrarian crisis that pushes farmers to suicide. What we need to decide is whether the solution for that distress lies in doling out ‘bribes’ that anyway have little or no impact or investing in deep-seated reforms that will have a higher cost-to-benefit ratio.

It is easy to see, however, why politicians prefer the former route. It is instantaneous, makes for good headlines and if not alleviate distress, may buy peace from India’s biggest interest group. The problem with this approach is that it is transitory, expensive, inefficient and counterproductive. Sooner than later this “dole” becomes toxic for the party that had issued it.

There is also no direct co-relation between populism and votes. Had that been the case Congress—that had promised large-scale farm loan waivers within 10 days of forming the government—would have swept Madhya Pradesh instead of inching ahead of BJP in seats. The Shivraj Singh Chouhan government announced no loan waiver schemes just before elections but ended up marginally ahead of Congress in vote share.

Rahul Gandhi’s rhetoric on farm loan waiver is a clear indication that Congress has gambled on this risky electoral strategy to stop Narendra Modi from extending his tenure. The Gandhi scion is aware that it will be tough for him to encash this blank cheque if Congress returns to power, but he either doesn’t seriously believe in his party’s chances or calculates that BJP too will be forced into a race to bottom through competitive populism.

The bet on ‘competitive populism’ may have prompted Rahul to pump up the rhetoric and pull down the political discourse by uttering “we won’t let Modi ji sleep or rest or sit in peace until we make him waive farmers’ loans”. It is a clever tactic, aimed at pre-empting BJP’s moves in this direction. If the Centre comes out now with a debt-relief package of several thousand crores just before the Lok Sabha polls, Congress may claim the credit for it.

If nothing else, this should be reason enough for Modi not to fall into the trap of loan waivers and maintain the path of fiscal prudence. The signs, though, are discouraging. Following Congress’ win in three Hindi heartland states and announcement of debt-relief packages, BJP-ruled states such as Gujarat and Assam have followed suit. While the Vijay Rupani government in Gujarat has waived off Rs 650 crore rural electricity bills, the Sarbananda Sonowal government in Assam has announced a loan waiver package of Rs 600 crore.

In fact, if Congress has been guilty of profligacy, BJP’s record has been no better. Some may even argue that this “race to the bottom” began when UP chief minister Yogi Adityanath waived off farm loans worth more than Rs 7,000 crore last year, prompting similar moves by Devendra Fadnavis government in Maharashtra. This competitive populism is sure to wreck the finances of states that are already struggling and put the NDA government under tremendous pressure ahead of 2019 polls.

Rahul has tweeted enthusiastically about new Madhya Pradesh chief minister Kamal Nath waiving off farm loans “as promised”. He forgot to mention perhaps that Nath’s loan-waiver scheme comes with several riders that leaves out many farmers outside the eligibility loop. According to the Madhya Praesh government notification, the crop loan waiver has a cut-off limit of 31 March, and it will only address “outstanding short-term crop loans of up to Rs 2 lakh as on March 31, 2018, taken from nationalised and co-operative banks by farmers”. The eligibility will apparently be determined “through an exercise”, notes a report in Economic Times.

The BJP has accused Congress of cheating farmers and pointed out that Rahul never mentioned a “cut-off” date for loan waivers during his poll campaign. As they say, devil lies in the details. It is instructive to note how Congress is dealing with the after-effects of this risky strategy elsewhere.

Karnataka, where Congress has a ruling alliance with JD(S), has requested the Modi government at Centre to bear half the cost of its proposed farm loan waiver “to help reduce the burden on the state’s coffers”. During a visit to New Delhi in June, Chief Minister HD Kumaraswamy had requested Modi to foot 50 percent of the total bill.

Congress had promised to waive the loans of farmers in Punjab before gaining power last year. According to latest reports, a cash-strapped Punjab government has implemented partial waivers, prompting farmers to threaten large-scale protest in the New Year.

These examples indicate that it is easier to issue loan waiver promises than keeping it. Instead of hurtling down the slippery slope of waivers, Modi should call Rahul’s bluff. That would make more economic and political sense.